Trading volume is a fundamental quantity generated by the market, and is the primary indicator of trading activity in a stock market [see reference 1, cited below]. The amount of trading volume reflects the liquidity of a security. The liquidity of a stock has a direct effect on the market impact of trading in the stock. Highly liquid stocks tend to have significantly lower market impacts compared with illiquid ones. Since the liquidity of a stock can vary over time and even within a day, predicting it is an important task [see reference 2].
Daily and intraday volume estimation can be used by traders to identify hard-to-trade securities. Moreover, volume estimation is important for pre-trade analytics. Trading volume supplies important information on current trading characteristics of securities in a portfolio. Trading volume also may be used as an input to quantitative analysis such as market impact calculations and trade scheduling. Thus it becomes extremely important to estimate this quantity accurately.